The Cape Cod market continues to be one of the most interesting in the country. A lot of attention has been showered on it since March 2020 changed everything — and today’s real estate market continues to confound just about everyone. However, there are key statistics that show what is really happening in the market today.
Here’s what we are monitoring at the Cape Cod and Islands Association of REALTORS® to explain the Cape Cod market moving forward:
Months Supply of Inventory Explains a Lot in This Market
There feels like there is more inventory on the market, but the reality is that there is not. When comparing inventory numbers to last June, the overall numbers were down, and the number of new listings are still down. So, why does there feel like there are more listings? It feels this way because months supply of inventory is up.
What does Months Supply of Inventory Mean?
Months supply of inventory is a metric that measures how long it would take to sell all of the inventory on the market. It measures not only inventory, but also measures the rate at which properties are going under agreement; essentially the demand that is in the market.
Monthly supply of inventory is up from last June despite inventory being down, which is a way to quantify lessening demand in the marketplace.
In June, the supply of inventory for Barnstable County was 1.6 months. During the low inventory, high demand months, we were at 8/10ths of a month or so – meaning there was about three week’s supply of inventory on the market. Today’s number is double that.
What is a ‘Balanced Market’?
Most real estate economists say a balanced housing market is when there is six to nine months of inventory on the market because that is the time it takes to build a home to add supply. In our market, it can take significantly longer than six to nine months to build a home to add to supply since there is very little new home production in Barnstable County. But this number can change quickly as demand grows and lessens month to month.
Housing Affordability Index Reaches an All-Time Low
We all know housing is increasingly more unaffordable on Cape Cod. While we had an imbalance prior to the pandemic, affordability has grown over the last two years — even despite wages going up.
What is the Housing Affordability Index?
This index measures housing affordability for the region by using median sales price, median income and prevailing interest rates. For example, an index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.
What is Barnstable County’s Affordability Index?
Barnstable County’s Housing Affordability Index has been steadily dropping as the median sales price has risen; however, in June it reached an all-time low. This finally passed the prior low, which was reached in 2006.
The current Barnstable County Housing Affordability Index is 43 — meaning that the area median household income is only 43% of what is necessary to afford a median-priced home.
Why is the Index Getting Worse Now?
A rising median sale price coupled to higher interest rates is creating an even greater loss of affordability for buyers.
The Cape Cod market changes quickly in today’s world — a world away from the slower pace pre-2020. And the subsets of the markets are changing even more quickly. It’s important to know these key indicators not just across the whole Cape, but in each town and village to be able to assess in real time what is happening in the real estate market.